According to an SEC filing, Microsoft says that around
42% of all its outstanding employee options will be covered
– and that most Microsoft employees who choose to sell
their options will only get a third of the proceeds this
year (the rest paid over an unspecified period – but only
if they continue to work for the firm).

The company also arranged for workers with “under-water”
options, those with strike prices above the current market
price, to sell their options immediately under an agreement
with JP Morgan.
According to the Financial Times, JP Morgan will offer to
purchase options covering 650 million shares with exercise
prices of between $33 and $59.56/share (those above the
current market price).

JP Morgan will sell 650,000,000 Microsoft shares as part
of the arrangement, according to Tuesday’s SEC filing,
worth some $18.8 billion at Tuesday’s closing price.
However, the bank then expects to buy back “substantially
more than half” of the stock, according to the report.
The exact amount will depend on the hedging strategy
designed to protect it from losses as a result of the
option retirement plan, according to the filing.

The bank will receive a fee based on the number of
options it buys, though Microsoft did not disclose the size
of the fee or the method that would be used to calculate
the value of the under-water employee options.

The calculation will be based on the company’s
average share price over a 15-day period, with employees
being given four weeks to decide whether to accept the
offer.